Toyota Finance Question

I financed mine through Toyota Financial as well. I was told there was no penalty for pre/early payment. I intend to pay more than the payment fee as well (have not made my first payment yet).

 

Any time I financed through them there was no pre-pay penalty. Can't help you on the additional payment question, but TFS has excellent customer service that you can call and ask.

 

Yup, and you get a real world angle that you wouldn't otherwise have. Be sure and let us know what you find out about making additional payments.

 

When I used them in the past I just used to send in extra cash every month and then when Iw as ready to payoof I just went to the site and found the payoff amount.

 

Here is your answer(s).

1) No prepayment penalty of any kind.

2) Any extra money you send will be applied to your next month's payment as a general rule. If your payment is $400, and you send in $600, your next bill will show a balance due of $200. If on that bill you send them $600 again, your next bill will show nothing owed. You actually have a credit amount in their eyes. If you call TFS, they can apply it directly to your principle, and your next bill will show $400 again.

 

Then the correct thing to do is to call them, and ask them to have it removed from the Principal amount, instead of interest balance. In the end, that will save you more money, as you are reducing the balance that is used to calculate that interest. Reducing the next payment does not reduce the amount of interest that you are paying by one penny.

As for no prepayment penalty, I can confirm this, as I have paid off the loan I took on the 2010 Prius V. Instead, I transferred the balance to a Home Equity Line of Credit (which did not fund until after delivery), but I was every pleasantly surprised that Toyota Finance refunded $36 .62 in interest, as I prepaid the final balance before their payoff date. This HELOC loan allows me to deduct the interest, as it is now officially interest on my home not a car.

 

Unless you keep doing that and you shorten up the term. Then it will save you the interest. BTW, that is exactly why toyota (and every bank out there) just applies it to the next payment. They are hoping that you will skip and month and they collect the full interest due.

 

But since the interest is pre-determined, shortening the final term will have you pay the full amount of interest, unless you pay down principal. Otherwise, once you have pre-paid all the interest back, you then start to pay down the principal.

That is why many loan sites do not allow you to pay off principal early, as it costs them all their profit.

 

With toyota, if you call them, the essentially re-work the loan by lowering the balance due but keep the same payment. I'll use simple math to explain it (I know you don't need it EGL, but for others).

Original balance is $15000, $18000 with interest if paid over 60 months with equal payments of $300. If you pay them $400 a month, and they don't discount the interest, you would pay the vehicle off in 45 months. In reality, you will only pay about 40 months due to the extra interest that hasn't been "earned" by toyota.

Does this make it more clear?

 

Watch your statements carefully. In April we wrote a letter to Toyota Financial stating: "Please apply any funds in excess of the current total due as a principal reduction payment, every month."

They did it for about 2 months. Now they are back to ignoring what we have specifically told them to do with our overpayments. It also doesn't help that TFS doesn't put any information on the actual bills that they send out to their 'clients' stating how the previous payment was credited, or how much of the bill is interest vs principle, like a mortgage or credit card statement does.

We are at the point of complaining to the better business bureau about them. And/or just paying the car off with a credit card. Our next car will not be financed through them.

Read your bills carefully.

 

I just made my first payment, assuming that the extra would be applied towards principal. When I got my next bill, it turned out that the extra had actually just been applied to the next payment. Of course, this is not the same thing as being applied to principal, since it means you're not actually saving any money on interest.

I called them up and asked for the extra to be applied to principal instead, and they said they could make that change for me over the phone this time, but in the future I would need to send a separate check for any extra principal I want to pay off, and it should be sent to a different address.

Toyota Financial Services
P.O. Box 9490
Cedar Rapids, Iowa
52409-9490

Write "Apply to principal only" and your account number on the check in the memo area.

They also said there's no way to pay extra principal online.

I wonder how many people get duped into not actually paying down their loans any faster because they don't realize what's going on here.

 

interesting topic , im glad this came up . i always assumed that what ever extra i send would go towards the principal. now i will call them and make sure what ever extra goes towards the principal. Thanks for posting this.

 

You're going to pay 2-3 times as much in interest on your credit card.

 

Wouldn't we be able to change the term of the loan?. If ppl are able to pay a few dollars extra every month, then can't we call toyota and have them recompute the balance for a shorter term?

 

Yes, that's what they are doing. Send in extra money each month then make sure Toyota applies it towards your principal so you will save in interest. No need to redo loan terms at all since there's no prepaypent penalty.